Saturday, December 19, 2009, 5:55AM ET - U.S. Markets Closed.

"The Worst Is Yet to Come": If You're Not Petrified, You're Not Paying Attention

Posted May 15, 2009 09:31am EDT by Aaron Task in Investing, Recession, Banking, Autos, Housing
The green shoots story took a bit of hit this week between data on April retail sales, weekly jobless claims and foreclosures. But the whole concept of the economy finding its footing was "preposterous" to begin with, says Howard Davidowitz, chairman of Davidowitz & Associates.

"We're in a complete mess and the consumer is smart enough to know it," says Davidowitz, whose firm does consulting for the retail industry. "If the consumer isn't petrified, he or she is a damn fool."

Davidowitz, who is nothing if not opinionated (and colorful), paints a very grim picture: "The worst is yet to come with consumers and banks," he says. "This country is going into a 10-year decline. Living standards will never be the same."

This outlook is based on the following main points:

  • With the unemployment rate rising into double digits - and that's not counting the millions of "underemployed" Americans - consumers are hitting the breaks, which is having a huge impact, given consumer spending accounts for about 70% of economic activity.
  • Rising unemployment and the $8 trillion negative wealth effect of housing mean more Americans will default on not just mortgages but student loans and auto loans and credit card debt.
  • More consumer loan defaults will hit banks, which are also threatened by what Davidowitz calls a "depression" in commercial real estate, noting the recent bankruptcy of General Growth Properties and distressed sales by Developers Diversified and other REITs.

As for all the hullabaloo about the stress tests, he says they were a sham and part of a "con game to get private money to finance these institutions because [Treasury] can't get more money from Congress. It's the ‘greater fool' theory."

"We're now in Barack Obama's world where money goes into the most inefficient parts of the economy and we're bailing everyone out," says Daviowitz, who opposes bailouts for financials and automakers alike. "The bailout money is in the sewer and gone."

1073 Comments

Yahoo! Finance User
Yahoo! Finance User - Friday May 15, 2009 09:38AM EDT

He nailed it.... "We're now in xxxxxxxxx's world where money goes into the most inefficient parts of the economy and we're bailing everyone out,"

Jeff
Jeff - Friday May 15, 2009 09:38AM EDT

I love this guy. Don't agree with everything he said, but at least he doesn't hold back.

Yahoo! Finance User
Yahoo! Finance User - Friday May 15, 2009 09:39AM EDT

He nailed it.... "The bailout money is in the sewer and gone."

K L
K L - Friday May 15, 2009 09:42AM EDT

Disclose your position you wannabe market manipulator. His face is blue from the rally, look like he caught in the upturn. LOLZ

Yahoo! Finance User
Yahoo! Finance User - Friday May 15, 2009 09:43AM EDT

A couple trillion tossed out the window.. Government should not be micromanaging the economy.. they should be setting a stable foundation for it,, they have failed at both.. we are screwed...

RurikH
RurikH - Friday May 15, 2009 09:44AM EDT

This guy sounds like your typical conservative fool. "The Liberals will...," "The country will...," "The economy will...." If anybody actually knew what was going to happen, things would be a lot different. I'm also sick of people blaming Obama when Bush was the first one to give a bailout to Wall Street. This article isn't news; it's opinuendo.

John
John - Friday May 15, 2009 09:47AM EDT

Davidowitz...another freak out from the sewer.

Yahoo! Finance User
Yahoo! Finance User - Friday May 15, 2009 09:47AM EDT

We have 63 Billion Dollars in Mortgages that are 90 days late or more ant that is JUST Freddie Mac. Factoring in Unemployment going UP... and no TOXIC ASSET PROGRAM... A real wave of bad crap is coming this SUMMER.

Yahoo! Finance User
Yahoo! Finance User - Friday May 15, 2009 09:47AM EDT

Sadly the bailouts and new FDIC capitalization requirements are squeezing the small responsible banks who don't have bailout funds... unintended consequence or...?

Ed
Ed - Friday May 15, 2009 09:49AM EDT

Terrible guy. Should not be invited anymore. Would prefer somebody who knows more, not somebody who pretends who knows everything.

Yahoo! Finance User
Yahoo! Finance User - Friday May 15, 2009 09:49AM EDT

I'm sure there will be a lot of people posting that say this guy is a nut and senile etc. What he is saying is exactly what people don't want to hear. It seems like people would rather be lied to so they feel better but lose money than be told the honest answers, feel bad, and make or save money. The markets are truly irrational at times and I think this is one of them. See you at the bottom after I've shorted on the way down!

Yahoo! Finance User
Yahoo! Finance User - Friday May 15, 2009 09:49AM EDT

I'm sure there will be a lot of people posting that say this guy is a nut and senile etc. What he is saying is exactly what people don't want to hear. It seems like people would rather be lied to so they feel better but lose money than be told the honest answers, feel bad, and make or save money. The markets are truly irrational at times and I think this is one of them. See you at the bottom after I've shorted on the way down!

Yahoo! Finance User
Yahoo! Finance User - Friday May 15, 2009 09:52AM EDT

The eye of the hurricane has just about passed over...get ready for the next leg down. This bear market rally was almost the same length as a similar one in the Gret Depression. See www.BearMarketComparison.com and look at how close it was!

- Friday May 15, 2009 09:53AM EDT

"Better than Expected"

Yahoo! Finance User
Yahoo! Finance User - Friday May 15, 2009 09:54AM EDT

Instead of bailing out the fools that made poor business decisions, how about we give the money to their competitors and have them pick up the pieces? AIG should be out of business.

Matthew
Matthew - Friday May 15, 2009 09:55AM EDT

Blame Bush. Blame Obama. Blame the Federal Reserve. Take a dump.

GordonR
GordonR - Friday May 15, 2009 09:55AM EDT

Some of us suspected/knew from way back that the issue in the economy was simply too much debt. Maybe we don't understand the complicated financial terms and accounting gyrations; but we know if you owe someone a lot of money, and you must pay it back, then you are not going to be able to live a life of luxury until the debts are paid off. This guy is just plain talking like you and I.

Jamie
Jamie - Friday May 15, 2009 09:55AM EDT

Just more of YAHOO doom and gloom.........................Consumer confidence was up.........Everyone is now an analyst..........I've yet to see tech ticker interview anyone whom is an OPTOMIST!

Yahoo! Finance User
Yahoo! Finance User - Friday May 15, 2009 09:55AM EDT

Obama has already put us deeper in debt than Bush did in 6 years. At this rate, the US will sink into the earth's core by 2011.

Jason
Jason - Friday May 15, 2009 09:55AM EDT

He reminds me of Harry Caray without the bullet proof glasses. He's right on, but may want to lay off the sauce...

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